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New report: Slashing education funds for corporate tax breaks hurts states, citizens in long run

Posted on 08/23/13 at 3:45pm

A new report shows that many states — including Michigan — are implementing short-sighted programs that divert scarce resources to economic programs that may or may not work, at the expense of critical investments in education that benefit the states’ residents in the long term.

According to a report by the Economic Policy Institute, states like Michigan are erroneously opting to focus on schemes to lure economic investments from outside the state while neglecting their primary responsibility of ensuring their citizens have the education and training to populate a 21st century workforce.

Completed for the Economic Analysis and Research Network, which includes the Michigan League for Public Policy, the EPI study warned that these state-level policies result in chronic disinvestment in education, with catastrophic long-term consequences.

The report found that high-wage states are states with a well-educated workforce. In turn, the educational attainment of a state’s workforce bears a direct correlation to median wages in the state. According to the most recent Census data, Michigan produces slightly more high school graduates than the national average, but lags behind the U.S. average in graduates with bachelor’s degrees and beyond.

The EPI report also found:

States that invest in education can build a strong foundation for economic success and shared prosperity. Providing expanded access to high-quality education will not only expand economic opportunity for residents, but is also likely do more to strengthen the overall economy than anything else a state government can do.

Investing in education benefits state budgets in the long run because workers with higher incomes contribute more through taxes over the course of their lifetimes.

The report cautioned states against slashing taxes as a strategy to capture out-of-state investments, calling it a “race-to-the-bottom state economic development strategy that undermines the ability to invest in education.”

Michigan provides a clear example of this phenomenon: In 2010, the Snyder Administration and the Legislature slashed more than $1 billion from classrooms to help pay for a $1.8-billion tax cut for corporations.

The move has been especially contentious because the strategy has not resulted in economic growth. In fact, Michigan’s unemployment rate is well above the national rate, and Michigan’s unemployment has gone up three straight months in the summer. At the same time, many schools are in chaos, with major districts in various stages of collapse or takeover and students’ abilities to learn at greater risk than ever before.

College education is also becoming increasingly less affordable and more out of reach for many middle-income Michigan students, with tuition rates nearly doubling over the past decade from $4,945 in 2001-2002 to $8,253 in 2012-2013. Meanwhile, state investment in universities and colleges has been cut in half in the same time period, from $6,698 per student to $3,572, according to the Presidents Council, State Universities of Michigan.

At the same time as the state disinvests in education, it is opening the door to highly controversial, unproven schemes for learning, such as profit-driven ventures, including online schools run by technology companies.

Flying against facts and data, Michigan’s spending priorities over the past two years reflect the core concerns of the EPI report, and illustrate the worst ways to invest in a state’s future.